HSH Nordbank AG, the world’s largest shipping lender, said the crisis buffeting the industry may worsen through 2014 as clients contend with a drop in demand and the arrival of a new generation of container vessels.
HSH Nordbank, which holds 27 billion euros ($35 billion) of shipping loans in its portfolio, has taken provisions to prepare for the worst-case scenario, HSH Chief Executive Officer Constantin von Oesterreich told journalists in Hamburg, the bank’s home city, last night.
“The market doesn’t move sideways for a long time, it will either get better or worse,” he said. “It could very well be that it will get tougher before the end of 2014.” A recovery is unlikely before that, said von Oesterreich.
HSH Nordbank, which is controlled by the German states of Hamburg and Schleswig-Holstein, is trying to reduce bad loans to shipping clients struggling to service their debt amid the slump in demand, overcapacity of vessels and low freight rates.
Shipping loans make up 27 billion euros of the lender’s 125 billion-euro portfolio, von Oesterreich said. “That’s a really high number,” he said.
Hamburg and Schleswig-Holstein have increased guarantees to cover potential losses at HSH Nordbank to 10 billion euros from 7 billion euros, a step the bank expects the European Union to grant preliminary approval for by June 16, von Oesterreich said.
First-quarter net income fell 41 percent to 73 million euros, von Oesterreich said before the official release of the results tomorrow.
In the first quarter of last year, HSH Nordbank profited from the repurchase of subordinated bonds, which boosted earnings by 261 million euros, Rune Hoffmann, the company’s spokesman, said.
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